Toomey’s Stimulus Charge Doesn’t Add Up

Republican Pat Toomey’s new ad in the Pennsylvania Senate race states that the $862 billion stimulus package "gave us record debt without creating jobs." He’s wrong on both counts.

The ad, which was released Aug. 10, criticizes Democratic Rep. Joe Sestak for a number of his votes that prove, the ad claims, "Washington is failing." It says: "Bailouts, takeovers, a stimulus that gave us record debt without creating jobs. Congressman Joe Sestak voted for all of it." Sestak did vote for the American Recovery and Reinvestment Act — more commonly known as the stimulus bill — which at first was expected to cost $787 billion, but now has risen to an estimated $862 billion. But it is wrong to say it "gave us record debt without creating jobs."

Let’s take the easy one first: jobs. There has been some debate over the exact number of jobs that have been created by the stimulus bill, as we have noted in the past, but there is no question that it has created and saved jobs. The nonpartisan Congressional Budget Office estimated that through March 2010, the stimulus bill was responsible for the employment of between 1.2 million and 2.8 million people. The CBO said the stimulus had lowered the national unemployment rate "by between 0.7 percentage points and 1.5 percentage points."

But did it cause a "record debt"? No, although we are well on our way to a record debt.

The ad cites a blog item by John Fritze in USA Today with the headline, "National debt soars to highest level since World War II." As the headline says, the national debt is not at a "record." That happened during World War II. The blog item was based on a May 30 CBO report that said the debt as a percentage of the U.S. gross domestic product was expected to increase from 53 percent at the end of 2009 to a projected 62 percent by the end of 2010. But the report says the record was 109 percent of GDP, a mark that was reached in 1946.

CBO, May 30: A useful barometer of fiscal policy is the amount of government debt held by the public relative to annual economic output. Such debt stood at 40 percent of GDP at the end of 2008, a little above the 40-year average of 36 percent. Since then, large deficits have caused debt held by the public to increase sharply — to 53 percent of GDP at the end of 2009 and, CBO projects, to 62 percent by the end of this year. Debt has exceeded 50 percent of GDP during only one other period in U.S. history: between 1942 and 1956, when it spiked (peaking at 109 percent of GDP) because of a surge in federal spending during World War II.

The one-time stimulus act, of course, added about $862 billion to the national debt held by the public, which now stands at $8.8 trillion (not including money that the federal government owes itself). But the CBO says the more significant factor in the long term is spending on entitlement programs such as Medicare, Medicaid and Social Security — spending that threatens to push the national debt to "unsustainable levels." Under one possible scenario, the "debt as a share of GDP would exceed its historical peak of 109 percent by 2025 and would reach 185 percent in 2035," the CBO says.

CBO, May 30: Under current laws and policies, an aging population and rapidly rising health care costs will sharply increase federal spending for health care programs and Social Security. Unless revenues increase at a similar pace, such spending will cause federal debt to grow to unsustainable levels. If policymakers are to put the nation on a sustainable budgetary path, they will need to let revenues increase substantially as a percentage of gross domestic product, decrease spending significantly from projected levels, or adopt some combination of those two approaches.

Toomey would be on safe ground if he said the stimulus added to the debt without creating enough jobs — those would be his opinions, and defensible ones at that. But he can’t say it didn’t create any jobs and caused a record debt.